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EE--Business ForumBusiness Forum Prague October 6 th, 2009 “How to run your M&A – some Recommendations”
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Frank Berger Director Corum Group International
� Berlin * , Dipl.-Math.@TUB, Stanford GSB
� > 30 years management in IT Industry
� Founder & Seller IQproducts GmbH
� 3 years Consultant to the Software Industry � 3 years M&A Advisor with the Corum Group
The Presenter
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The Corum Group
� Worldwide M&A Consultant since 1985
� Only M&A, only Software and IT Services
� Middle Market Focus (3 to 100 M$ Revenues)
� Project Managers are mostly former CEOs in SW- and IT Services Firms
� Offices in Europe, Canada, Latin America and United States
� 200+ transactions completed
� $6 billion in wealth created
� 60% cross-border transactions
� Host of Selling Up Selling Out conferences & multi-national Merge Briefings
� Sponsor of World Financial Symposiums conferences
� Publisher of industry-leading M&A research
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Agenda Today
� The M&A Project - Why and When?
� The M&A Project - What and What Not?
� Closing with Langara
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As an Entrepreneur - What Are Your Options?
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Why Sellers Sell
Money
Growth/ Opportunity
Fatigue
Conflict
Funding the enterprise Personal liquidity – hard work but no money in the bank M&A is the primary source of liquidity!
Partners, Employees, Family, Board/Investors
Age / Burnout Health – what if something happened? Management challenges – aiming at something new
Insure company’s success Cannot make it as a small company Technological threat/ change
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U.S. dollar volume all industries
Sources: Dealogic, IPO Central, Corum
M&A Activity vs. IPO Activity
$0$100$200$300$400$500$600$700$800$900
$1,000$1,100$1,200$1,300$1,400$1,500$1,600$1,700
In B
illio
ns
M&A Dollar Volume IPO Amount Raised
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• Your Personal Needs , Plans, Wishes…
• The M&A market in general , trends in valuations etc:
� The situation and trends in your company’s market segment:
� The market position, performance and future of your company :
Timing for an M&A Project
THE TRIGGER !
IMPORTANT
MORE IMPORTANT
MOST IMPORTANT
The ideal starting-point is determined by FOUR key parameters:
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� IMF Raises Global Growth 2010 to 3.1%
� World Bank Sees True Global Recovery
� GY: Exports rise by 7% (July)
� U.S. Productivity Up 6.6% in Q2
� Goldman Sachs Revises China Growth to 8.3%
� Clear recovery in Real Estate
� Worldwide Growth of Stock Markets
� …..
� …..
� However: Uncertainty remains
Signs of Recovery
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Public Markets
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09
Nasdaq S&P Tech Dow
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European Public Markets
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…and the M&A Market is doing well
CORUM Index $ values in millions
# of Transactions# of Mega Deals >$1BLargest DealAverage Deal ValueMedian Seller Revenue# VC backed Exits% Terms UndisclosedAll Cash (announced)% Targets Public% Buyers Public
Sep-092556
$6,400$381$11233
77%47%13%45%
Sep-082421
$2,000$99$2817
64%59%16%49%
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Mega Deals Are Up
� Xerox � ACS : $6.4b ; 1.3x
� Adobe � Omniture : $1.8b ; 5.2x
� SilverLake � Skype : $2b ; 5.1x
� Dell � Perot Systems : $3.9b ; 1.4x
� CISCO � Tandberg: $ 3.0b
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Corum Transactions Are Up
� Six Companies Sold In Q3
� Six More In LOI During Q3
� Five More Weighing Offers
� Corum New Client - and Project Activity High
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Market Trends e-Commerce (1)
Online Retail
• Amazon continues to Wal-Murder online retail
• Mid-tier vendors: innovate, expand, sell, or perish
• Verticalization becomes a necessity to survival
• International and US e-commerce laws getting closer
• Security still a concern
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Market Trends e-Commerce (2)
e-Commerce Infrastructure
� Consolidation continues : � Logistics � Hosting � Payment / cart / billing � Security
� Innovation begins to plateau:
� Advertising / Marketing
� Innovation continues to excel: � Customer intelligence � Search
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Internet Market
Public Valuations Deal Spotlight: Sector: e-Commerce Target: BuscaPe.com (Brasil) Buyer: Naspers (SA) Date: September 2009 Transaction Value: $342m Comments: � Geographic expansion � Dominant regional player � Favorable Demographics
Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09
EV/EBITDA 6.05 x 7.54 x 9.80 x 11.78 x 11.81 x 13.32 x 13.02 x 15.80 x
EV/S 1.36 x 1.60 x 2.11 x 2.26 x 2.30 x 2.48 x 2.60 x 2.70 x
Internet
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Recent E-Commerce Transactions (Retail)
GoAdv acquires LeGuide.com (February 2009)
�GoAdv, of Ireland, operates a network of retail and search-focused websites for consumers globally.
�LeGuide.com, of France, is an online shopping portal to consumers in Europe, enabling users to search, compare and purchase a wide variety of products online.
�The acquisition further strengthens GoAdv’s consumer goods market position in Europe. Both companies are publicly traded on the Euronext.
�Transaction valued at $56.75m; 2.2x TTM revenues
Amazon.com acquires Zappos.com (July 2009)
�Amazon.com is the world’s largest online marketplace , an aggregate for online retailers of consumer goods and other proprietary goods.
�Zappos.com operates as an online retailer of shoes and apparel for the consumer market.
�Amazon gains considerable market-share and ,more importantly, considerable market penetration to verticalized consumer apparel segments.
�Transaction valued at $847m; 1.3x TTM revenues
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Recent E-Commerce Transactions (Infrastructure)
Timberline Interactive acquires CommerceV3 (Septemb er 2009)
�Timberline provides e-commerce website design and online marketing services to retailers . Also provides e-commerce shopping cart software.
�CommerceV3 provides e-commerce software-as-a-service (SaaS) that enables online retailers to build and maintain Web stores.
�The acquisition brings together two e-commerce companies capable of delivering two pieces: the online marketing services to drive traffic, and the online store or shopping cart technology to con vert it to sales.
�Transaction value undisclosed.
WebTrends [Francisco Partners] acquires Widemile, I nc. (July 2009)
�WebTrends provides web-based and hosted CRM customer analytics software-as-a-service (SaaS) and related managed services to enterprises.
�Widemile provides testing and site optimization SaaS and web analytics services to online marketers and interactive agencies.
�The acquisition was a technology buy for Webtrends. Adding new testing capabilities will help WebTrends compete with Omniture’s broader portfolio.
�Transaction value undisclosed.
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There are good arguments FOR it: � Be in Sync with the Recovery
� Close a transaction before the Next Recession comes ??
� Strategic buyers and PE have lots of Cash, PE starting to invest again
� Consolidation Activity is Strong
� Get Active before the Market for your Company Narrows
� M&A Market is very active again
� Valuations improved significantly
� “Wealth Effect” - What is the value of a €, $, CZK gained today?
� The “Value Added ” by the Process
Is the time right to start an M&A Project ?
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M R R S
M
Model – You will develop a better model from the process
Market Feedback – You gain immeasurably from buyer feedback
Research – You learn a great deal from these proprietary databases
Relationships – Not everyone is a buyer, but you open many doors
Sale of your company, or significant recapitalization
A professional, global M&A Project is “Adding Value ”
Insight from over 200 M&A Transactions
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Agenda Today
� The M&A Project - Why and When?
� The M&A Project - What and What Not?
� Closing with Langara
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� The M&A process takes time � Nine to twelve months is a reasonable expectation � In the extremes, a few weeks to years
� Time and success depend on careful planning and proper execution of the process
� The M&A process requires patience Sarbanes Oxley, Foreign Corruption Practices Act Audit, thorough
due diligence, volatile markets, management changes, buyers own timelines….
The M&A Process: Characteristics
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The M&A Process: Overview
Decision SELL UP SELL OUT
Decision SELL UP SELL OUT
Preparation INTERNAL DUE DILIGENCE
Preparation INTERNAL DUE DILIGENCE
Presentation EXECUTIVE SUMMARY
Presentation EXECUTIVE SUMMARY
Research POTENTIAL PARTNERS
Research POTENTIAL PARTNERS
Contact INFORMATION EXCHANGE
Contact INFORMATION EXCHANGE
Follow-up CONFERENCE CALLS & VISITS
Follow-up CONFERENCE CALLS & VISITS
Valuation Valuation
Structure LETTER OF INTENT
Structure LETTER OF INTENT
Due Diligence Due Diligence
Final Negotiations CONTRACT
Final Negotiations CONTRACT
Closing Closing
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*On average, based on a global search
A Professionally Executed M&A Project will include:
700 700 to to 11,,000000 communications of various kinds (email, voicemail, letters, conference calls, etc.)
10 10 to to 3030 expressions of interest
1515 to to 2020 NDAs
8 8 to to 1010 qualified parties
1 1 to to 22 offers
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What Buyers Are Looking For
� Consolidation (market leaders)
� Tuck-ins with positive EBITDA
� Growth
� Client Base
� Geographical expansion
� Recurring revenue
� Small IP acquisitions with a Laser focus
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Targets
� Firms selling to the same customer � Companies Interested in diversification
� Firms with complementary products
� Technology partners/acquirers
� Competitors, Users, Dealers/OEMs
� Over $400 billion in uncommitted funds � Primarily concerned with ROI
� No strategic leverage
� Price paid may be lower than strategic buyers, but is in cash
� Due diligence is tough � Will try to keep management (as shareholders)
(b) Financial Buyers
(a) Strategic Buyers
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You Will Need at Least
� Researched buyers list incl. contact names and EAs (A, B & Special)
� Strategic analysis per buyer
� Introductory Letter (s)
� Executive Summary
� Transaction NDA
� Financial Memorandum (history, 3 years projections…)
� Corporate Presentation (verbal / PPT)
� Valuation
Presenting Your Company
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� Unable to portray value Credibility in valuation is imperative � Incomplete due diligence preparation This will prolong the process � Hiding of Critical Issues The M&A process requires total openness � Not orchestrating/ synchronizing all parties properly This is the tough part! � Lack of clearly defined closing conditions Don’t be greedy & avoid “circular negotiations”
Biggest Mistakes in The Process
� Dealing with only one buyer No leverage in negotiation � Improper research of potential buyers “A,” “B,” financial, international � Contact at wrong level, wrong person Not knowing the buyer well enough � Not understanding buyer’s process Timeline, decision-makers � Not qualifying buyer properly Ability, interest, needs etc.
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There are good arguments FOR it : � Be in Sync with the Recovery � Close a transaction before the Next Recession comes ?? � Strategic buyers and PE have lots of Cash, PE starting to invest again � Consolidation Activity is Strong � Get Active before the Market for your Company might be Closed � M&A Market is very active again � Valuations have improved significantly � “Wealth Effect” - What is the value of a €, $, CZK gained today? � The “Value Added ” by the Process
Is the time right to start an M&A Project ?
Ultimately, the deciding factors are your personal needs & wishes and the situation your company is in!
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Corum’s Annual Client Celebration Aug. 29 – Sept. 1 A tradition for 22 years
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Upcoming Corum Events
October 5: Prague -- SUSO
October 6: Boston -- MB
October 8: Lyon – MB
October 8: Washington DC -- MB
October 13: Scotland -- MB
October 13: Austin -- SUSO
October 14: Ireland -- MB
October 20: Stockholm -- MB/SUSO
October 22: Denmark -- MB/SUSO
October 22: Grenoble -- MB
October 23: Munich -- MB
October 27: Frankfurt – MB
October 27: Dublin – SUSO
November 5: MERGE Webinar (Int’l)
November 10: MERGE Webinar (France)
November 11: MERGE Webinar (DACH)
November 17: London – WFS
November 18: Ft. Lauderdale -- MB
Merge Briefing (MB) Selling Up Selling Out (SUSO) World Financial Symposium (WFS)
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Contact Information
Research and Conferences
www.corumgroup.com
Corum Group Ltd. 10500 NE 8th Street, Suite 1500 Bellevue, WA 98004 USA +1 425-455-8281
Corum Group International S.à.r.l. Frank Berger, Regional Director [email protected] Basteiplatz 7 8001 Zürich Switzerland +41 44 251 82 65
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